BQuick On Feb. 28: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. U.S. Stock Rout Deepens, Crude Slumps
Fear over the economic fallout from the spreading coronavirus tightened its grip on global markets, sending U.S. equities to a seventh straight loss and sparking demand for safe assets from Treasuries to the yen.
- The S&P 500 plunged more than 2.5 percent on Friday and is now down 14 percent from its record. The index is mired in its longest slump in over three years and careening toward its worst week since the financial crisis.
- Treasury yields sank to all-time lows, with the two-year tumbling through 1 percent and 30-year rates under 1.7 percent.
- Nymex crude slid toward $45 a barrel, while gold lost 1 percent.
- The Bloomberg Dollar Spot Index rose 0.3 percent.
Get your daily fix of global markets here.
2. India’s Worst Stock Market Selloff In Over 4 Years
Indian equity investors lost about Rs 5.5 lakh crore today, according to data available on Bombay Stock Exchange. Of this, they lost Rs 4 lakh crore within the first 15 minutes of the trade day.
- That came after Indian indices ended lower, extending their declines for the sixth consecutive trading session.
- The S&P BSE Sensex fell 3.64 percent, or 1,448.4 points, the most since August 2015, to end at 38,297.29.
- The NSE Nifty 50 fell 3.7 percent, registering its steepest fall since August 2015, to close at 11,201.75.
- Both the indices ended at over four-month low.
- The broader markets represented by the NSE Nifty 500 Index slumped 3.58 percent.
Follow the day’s trading action here.
Overseas investors this week pulled the most out of Indian equity markets in more than four years as stocks tumbled amid a global selloff triggered by the novel coronavirus outbreak.
- Foreign institutional investors withdrew Rs 11,368.7 crore from India’s equity market in the week ended Feb. 28, the most since August 2015, according to provisional data available on the National Stock Exchange of India Ltd.
- They pulled out Rs 19,436.9 crore during February, turning net sellers after three months.
Here’s how the selloff can impact Indian equities.
A sharp fall in Indian equities in February is “overdone” and a potential rebound in the days ahead will be swift, according to India’s largest portfolio manager. The Indian economy is not impacted by the coronavirus effect yet, says Prateek Agarwal of ASK Investment Managers.
3. New Coronavirus Cases Trigger Pandemic Concerns
Germany quarantined about 1,000 people and Switzerland banned large events, leading to the Geneva car show being cancelled. Iran and South Korea revealed more coronavirus cases and Nigeria, Africa’s most populous country, confirmed the first infection south of the Sahara desert.
- Mexico had its first preliminary positive test, while Australia, New Zealand, the Netherlands and Britain all reported new cases.
- Confirmed cases worldwide crossed 83,000 while deaths topped 2,800.
- Iran has reported 143 more infections while South Korea has added 571.
Follow the developments around the coronavirus outbreak here.
As the novel coronavirus spreads from China around the globe, India appears especially at risk because of its dense population, patchy health-care system and high rate of migration.
- The nation has confirmed just three cases, while the Indian government says 23,531 people are under observation.
- Still, the discovery in the U.S. of a case with no ties to a known outbreak has raised concern that a similar emergence in a country as densely populated as India could quickly overwhelm the chronically underfunded health-care system.
Read why the sheer size of India is cause for concern.
El-Erian’s Take On Virus Impact
When it comes to the impacts that the coronavirus could have on economic well-being and corporate profitability, it may be useful to think of four stages, according to Mohamed A. El-Erian.
- The first two are currently in play and legitimately worry many, from households, companies and financial markets to governments and central banks.
- They don’t just overlap but feed on each other in an unsettling manner.
- The third phase involves forming a market bottom and, subsequently, an economic one providing the basis for a sustained though far from full recovery.
- The final one is potentially longer-term and could have elements of de-globalization and, in the case of financial regulation and supervision, greater focus on liquidity risks among non-banks.
Still to come is the required, more holistic understanding of the different stages of this consequential shock.
4. India’s GDP Growth Rises, But...
The Indian economy continued to remain sluggish in the three months ended December 2019.
- Gross domestic product grew by 4.7 percent in the third quarter of 2019-20, showed data released by the Central Statistics Office on Friday.
- This compares to a revised 5.1 percent growth in the second quarter.
- The first estimate had pegged second quarter growth at 4.5 percent.
- The upward revision follows a change in the national income data for FY19.
- While the agricultural sector continued to exhibit higher growth, mining made a recovery. Manufacturing remained a drag on the economy.
The Indian economy could be growing at its lowest rate this fiscal since at least 2011-12.
5. Fiscal Deficit Widens, Core Sectors Grow
India's fiscal deficit touched 128.5 percent of the whole year budget target at January-end, said the Controller General of Accounts on Friday.
- The deficit during the same period during 2018-19 was 121.5 percent of that year's Revised Budget Estimate.
- As per the CGA data on monthly accounts, revenue receipts during April-January were at Rs 12.5 lakh crore or 67.6 percent of the RE for 2019-20.
Find out what the fiscal gap stood at in actual terms.
The eight core industries recorded a 2.2 percent growth in January helped by expansion in the production of coal, refinery products and electricity, official data released on Friday showed.
- The production of coal, refinery products and electricity grew by 8 percent, 1.9 percent and 2.8 percent, respectively.
- Sectors which recorded negative growth during the month under review are crude oil, natural gas, and fertiliser.
However, on a yearly basis, the core industries’ growth has slowed down significantly.
6. Low Oil Prices, Yet High Petrol Bills
While global economic uncertainty because of the new coronavirus outbreak has made crude cheaper, Indian consumers are unlikely to benefit because of high taxes and a depreciating rupee.
- Brent crude dropped 11 percent in the first four days of this week to $52.18 a barrel.
- But, according to the website of state-run Indian Oil Corporation Ltd., petrol prices in Delhi were cut by 5 paise to Rs 71.96 a litre till Thursday.
- A weaker rupee wiped off gains that could have translated into a reduction in prices of petrol and diesel, a government official said on the condition of anonymity.
- According to Petroleum Planning and Analysis Cell, every Re 1 fall in the local unit against the American currency, India’s oil import bill will increase by Rs 2,729 crore in January-March.
These factors explain the smaller cut in retail fuel prices.
7. Signs Of Normalcy In Delhi Even As Death Toll Rises
The death toll in Delhi's communal violence rose to 42 on Friday as clouds of smoke cleared to reveal the extent of the damage from the worst riots in the city in more than three decades and people gingerly stepped out for work and opened shops and other establishments.
- A total of 123 first information reports were registered and 630 people were either arrested or detained so far in connection with the communal violence.
- Nearly 7,000 paramilitary personnel have been deployed in the affected areas.
- The police have also initiated an “outreach programme” on Friday as part of which its officials met priests of various mosques in the riot-hit areas.
Officials also said they were making extra efforts to quell rumours, and were holding regular flag marches and interactions.
8. Why High Court Judges Are Transferred
“I never understood as even a member of the collegium as to why a particular high court judge is being transferred,” said retired Supreme Court Justice J Chelameswar to BloombergQuint in an interview on the controversy surrounding recent transfers of high court judges.
- It is not uncommon for judges to be transferred in India. It is also not uncommon for these transfers to cast doubt on the independence of judiciary and judge probity.
- On Wednesday, the government, on the recommendation of the Supreme Court Collegium, issued notices to transfer three high court judges. As has happened often over the years, not all the transfers were received well.
- There are no clear parameters detailing the circumstances which warrant transfer of high court judges, Justice Chelameswar explains.
- In an interview with BloombergQuint, Justice Chelameswar pointed to opacity in the transfer process that left not just the public, but also him as a member within the collegium, in the dark on the rationale behind certain transfers.
Read the full interview with the Supreme Court Justice on how “hardly any discussion” takes place while deciding transfers.
9. India’s Taxpayers Get A Dose Of ‘Ajit’s Liquid Oxygen’
This is either a tax department, and a government, very confused about what it wants or a one that is plain duplicitous, writes Menaka Doshi.
- It is absurd that the tax department can make any claim, and to fight that the taxpayer must first cough up a fifth of the money demanded.
- The tax department is the largest litigant and the largest loser.
- The government is also interfering with the exercise of judicial discretion by the ITAT.
Dear taxpayer, you’ve just been pranked by the Budget.
10. Automakers Continue Wait For A Rebound
Retail sales of cars and two-wheelers were flat or contracted in February for most automakers as demand didn’t pick up and dealers waited to exhaust existing inventory ahead of the transition to stricter emission standards, according to a BloombergQuint’s survey of eight large dealerships.
- “February is usually not a volume-heavy month and across our dealerships, we are expecting a double-digit drop in sales on a year-on-year basis,” said Kunal Vikram Singh, owner of multiple cars and two-wheeler dealerships of companies, including MG Motor and Royal Enfield, in Mumbai.
- Even as enquiries and footfall have been more or less the same, consumers have not been concluding the purchase, he said.
- Inventory position for two-wheelers and commercial vehicles is worse, according to dealers.
Here are the factors that could impact sales volumes for Indian automakers.